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Voici la présentation du deuxième groupe merci à Ch.M + Ce.P + Ant.Y
CPE 702 – P.F. JEANDET INTERNATIONAL MARKETING ISKRA
POWER TOOLS INTRODUCTION Iskra
is a Power Tools Company created around 1950 and started by serving the
Yugoslavian market. The firm acquired notoriety by the quality of its products
and its low workforce costs. Some cooperation agreements were made between Iskra
and other niche players present in the Eastern Europe markets. Iskra
which serves the Eastern Europe Professional and Do-It-Yourself (DIY) segments
is seeking new opportunities. The company would enter the Western Europe markets
where the competition is rude between manufacturers such as Black & Decker,
Bosch and Makita which strategies are different. The aim is to penetrate the
French and Italian markets, two less mature than the others. Some others think
that Iskra’s comparative advantages are adapted to Eastern Markets and would
stay in the Eastern Europe markets (moreover, the fall of communism involves the
opening of the Russian and new countries markets). We
will try the management to define a market strategy. But before, we want to
present the international and European Power Tools Sector, define the position
of Iskra in this industry and close by suggesting an action plan with concrete
recommendations. PART ONE PRESENTATION OF THE EUROPEAN POWER TOOLS
INDUSTRY INTERNATIONAL POWER TOOLS INDUSTRY Definition:
We
will begin by explaining what is a power tool? Power tools included any tool
containing a motor that was capable of being guided and supported manually by an
operator. Power tools played an intermediary role between traditional hand tools
and sophisticated machine tools. The large availability of electrical energy and
the relatively low cost of electric tools facilitated their use in small
workshops, the building and construction industries and households. Segmentation:
The power tools industry is divided in two segments: professional and hobby,
according to the usage. Users of the first category worked in industries such as
assembly-line manufacture, foundries and shipbuilding or woodworking. On the
other hand, the building and construction trade covered both professional and
Do-It-Yourself (DIY) segments. Purchase
Behavior: The power tools purchase behavior depend on labor
costs and disposable income. The professional power tool sector was most
developed in high-labor-cost countries and the DIY market was more pronounced in
countries with higher personal disposable incomes. The global turnover:
In 1989, the worldwide electric power tool industry was valued at just of over
DM 10 billion (that is to say, €5
billion). The sales were concentrated in three major markets:
As
we can see, Europe is the leader in term of market shares. Since 1980, the
industry had grown an average of 3% per year on a worldwide basis. Manufacturing:
a large number of manufacturers produce a wide range of tools but a majority of
them depend heavily on subcontractors. The big manufacturers make the central
components such as motors. Power
tools are mass produced even if the productivity depends on manufacturers’
efficiency or the level of mechanization. Here is the pie representing
manufacturing costs:
Trends:
after 1980s, a certain number of facts are influencing the competition in the
world: ·
The
more and more large preference for battery-powered (cordless) tools. Japanese
are manufacturing 20% of these products. ·
The
globalization and the opening of Eastern Europe Markets: that is profitable for
larger players like Iskra in terms of flexibility (markets open their doors:
benefiting from uncertainties in exchange rates, competitiveness). EUROPEAN POWER TOOLS INDUSTRY Figures:
Europeans, as we saw, are dominating the power tools sector. Germany, France,
Great Britain and Italy represent 75% of region’s sales. The industrial
segment is the more important. We will see the importance of the four countries
in the next table. Table 1: 1989 Unit Sales and Percentage of the Market
in Europe’s Largest Markets
Source: Bosch The
growth rates are very irregular from a country to another one. Indeed, as we
said before, these rates change continuously. The next table is demonstrating
this fact for the European countries: Table 2: European Power Tools Markets’ Percent of
Growth in 1989 and 1990
1989 Source: Databank – 1990 Source: Bosch Segments
and channels: We are said that professional tools are sold in
hardware stores, by tools specialists or by manufacturers or direct sales force
distributors. Purchase criteria are: quality, durability, after-sales service. In
the hobby segment, customers buy from wholesalers, hardware and department
stores, home centers, mail-order houses and supermarkets, that is to say, not
specifically from specialists. Purchasing factors are different from the
professional segment’s factors: manufacturer’s image, quality and price. The
price, brand name and packaging are important factors. The competition seems to
be rude. We
know that the change in purchasing patterns had led to a change in the
distribution of power tools. In the professional segment, direct sales play a
more significant role in the distribution process especially in the more mature
and structured markets. On the other hand, the consumer segment is under control
of mass merchandisers. In other words, manufacturers develop the establishment
of more direct links with professionals while with consumers the trend is to
establish more visible links. We also know that the Northern Europe markets are
mature meanwhile the Southern Europe markets are not. The role of mass
merchandisers and of direct sales is more important. The Third table, below,
shows us the difference between North and South Europe through two countries:
Germany and Italy (in professional and DIY segments): Table 3: Percentage of each distribution network, in
1990, in Italy and Germany
Source:
Black & Decker, Iskra Company Records Eastern
Europe and USSR: we are in a difficult period. The communist USSR felt
and new independent states emerged and started to try to develop market
economies. Three consequences are to be taken in power tools sector:
Competition
in Europe: in 1989, there were 75 power tool manufacturers in the
world in two categories: multinationals and domestic manufacturers. The large
players were present in professional and Do-It-Yourself (DIY) segments by a full
range of products and accessories. The small players were present in a few
segments. The smaller manufacturers benefited from an expertise image in their
field. In
Europe, the major competitors were: ·
Black & Decker: It was the largest power tool manufacturer in the
world. Black & Decker owned plants in 10 countries and sales points in more
than 100 another countries. It represented, with a turnover of $1.077M, 25% of
total market. Two third of incomes were from consumer segment and one third from
professional one. The firm pioneered the introduction of products to the DIY
segment. Black & Decker had has a good brand and quality image. A
joint-venture was made in Kranj for the Eastern Market. ·
Makita: This is a Japanese company. Makita entered the market
in 1950. The management of this company believe in Price strategy. Their
products cost 20 to 30% less than the average price). The added value of Makita
is the good quality and the After-Sales Service. The firm is present only in
professional segment with a wide range of products. Europe is a target for them.
Their goal: own 25% of the market. ·
Bosch:
Is the third bigger manufacturer. The firm owns plants in Germany and
Switzerland. Bosch is present in professional and DIY segments and is
distributed through all channels. ·
Skil:
Present in United States and in professional segment. Its aim: to develop a DIY
strategy. In Europe, the firm is present in Nordic markets in professional
sector. The company is also present in France and Germany. The strength of Skil
is the Price strategy. ·
Other niche players: Elu (Germany), Kango (Great Britain). The
table below shows the major competitors of Iskra, perceived successful by Iskra: Table 4: Major competitors of Iskra
Source:
company records. PART TWO A MEMBER OF THIS INDUSTRY: ISKRA POWER
TOOLS A SWOT ANALYSIS We
present, below, a SWOT analysis of Iskra Power Tools which will enable us to
know, in internal, its strengths and weaknesses and in external environment, its
opportunities and the threats to overcome: SWOT ANALYSIS
ISKRA POWER TOOLS’ MARKET POSITION
In
Western Europe: Iskra is present in both DIY and
professional segments. Its
strategy is characterized by joint-ventures agreements after the 1960s. The
company wanted to expand its product offering on other markets and it consisted
in electric drills which were based on the company’s expertise. The
cornerstone of these agreements was exchange programs with other toll
manufacturers. Namely, Iskra signed for cooperation with small power tool
manufacturers like Perles, Skil Europe and Ryobi, respectively Swiss, UK and
Netherlands, and Japan based. Selling Iskra’s products under their name,
Perles and Skil made Iskra take benefit from their own distribution network and
he their own products sold under the Iskra name in Yugoslavia. In
order to strengthen ties with Western power tool producers, Iskra operated as an
OEM supplier thanks to its company’s expertise. For example, agreements were
concluded with Elu, a German woodworking tools manufacturer, and Kango, a UK
company specialized in drills. In
Eastern Europe: Iskra concluded agreements with
power tools manufacturers in order to strengthen its business ties in this area. In
Czechoslovakia, Iskra operated on a three-way trading agreement with Naradi and
Merkuria in 1978: Perles shipped drills from Switzerland to Naradi, these
products were marketed under the Naradi name to Merkuria (a trading company)
which sold products under the Iskra name. This
cooperation enabled Iskra to get a 10% market share in Czechoslovakia. In
Poland, Iskra signed for the same agreement with Celma and it marketed Celma’s
products under Iskra’s name in Yugoslavia. In
the USSR, Iskra entered in contact with the Institute for Power Tools in Moscow
in 1984 during 5 years but only 100 power tools were brought to Yugoslavia. In
Yugoslavia: With a market share of 50% in
1989, Iskra was selling its products with Iskra Commerce thanks to its own
network or by its factory in Kranj. The
point is that the market was larger in Serbia than in Slovenia or Croatia
because these two countries had access to Italy and Austria geographically
speaking. COMPETITORS’ STRATEGY: Black
and Decker:
As we saw it before, Black and Decker was the largest power tool maker with 25%
market share. Its
segments were divided in two parts: the DIY segment represented 1/3 and the
professional one 2/3 and the company was selling in 100 countries around the
world. We can note that its competitive advantage is namely
the introduction of new products (25% and the level of 50% was expected for
1991), low costs (thanks to the standardization of motors, flexibility...), and
a strengthened presence in Eastern Europe thanks to joint-ventures in Kranj and
Czechoslovakia. Bosch:
This company was the third largest power tool producer in the world. Bosch
produced both DIY and professional segments and we can notice that it had a
strong position in Europe were its products were sold by all channels. Following the reunification of East and West Germany,
Bosch operated a joint-venture with VEB Elektrowerkzeuge Seibnitz in Dresden to
assemble power tools at this place and to sell its products with its network.
Besides, Bosch’s management planned to concentrate the Export Department in
Seibnitz. Makita:
With a presence on foreign markets except Europe, this company was specialized
in the professional segment only and was selling under a broad range of tools. Characterized
by its price competitiveness, the quality of its products and its After-Sales
service, Makita wasn’t nonetheless in competition with Iskra on its market. Skil:
This company is a major manufacturer on the market and it is particularly strong
in Germany and France. Its
segments are divided into two areas; the Nordic market which is covered by the
professional segment, and the rest of Europe by the DIY one. Niche
players:
With companies such as Festo and Elu in Germany or Kango in Great Britain, niche
players made the majority of sales on their own markets with premium prices. KEY
SUCCESS FACTORS OF THE COMPETITORS
Small
power tool manufacturers:
Makita, Skil, niche players ·
Niche products ·
Price competitiveness ·
Quality Large
power tool manufacturers:
Black and Decker, Bosch ·
Product innovation ·
Low costs ·
Strengthening of presence in foreign markets PART THREE STRATEGY AND MANUFACTURING RECOMMENDATIONS MANUFACTURING
STRATEGY
The implementation of manufacturing strategy
MANUFACTURING OPTIONS
Iskra has three options: positioning itself as a niche, an OEM
manufacturer, or realize investments. Niche manufacturer:
·
Focus on Europe market (France and Italy) ·
Specialization on company’s expertise (angle grinders
and drills) ·
Sell both segments ·
Strengthening ties with volume players ·
Development of Perles distribution network OEM manufacturers: ·
Focus on Europe and Eastern Europe markets ·
Sell both segments ·
Low costs strategy ·
Agreements with volume manufacturers to take benefit
form their distribution network Investment opportunities:
MARKET STRATEGY Iskra
Power Tools’ aim is to enter the Western Europe professional and DIY markets.
We will suggest a certain number of recommendations and propose an action plan
to follow, explaining why and how to do, when necessary.
Before
establishing a market strategy:
Establishing
an external marketing strategy:
The
unique way to make efficient this strategy is to reinforce Perles presence in
the Western Europe and give to the management the necessary funds and means. To
summarize, the company (which want to enter the Western Europe) should
concentrate on less mature and less structured markets such as France or Italy:
Our
priorities are: concentrate our efforts on Western Europe, particularly in
France and Italy by the development of Perles distribution network (in
Professional and DIY segments), serving first as a Niche Player and second as
OEM if problems with production process are solved. Our other priority can be
the implementation of a market strategy to enter the Russian market. CONCLUSION As
we have seen, the best strategy depends on the best choice: Iskra had chosen to
follow a market strategy oriented to the Western Europe Markets. With a wide
distribution network and a particular attention on the range of products will
permit to succeed in Western Europe. Iskra
is present in the world. Since this period (1989-1991), the company had followed
a good marketing strategy (even if it is not very well known). The products are
sold everywhere in the world and the firm is present in France and Italy, two
markets which constituted its aim in 1991. Iskra Group is conquering the world
… THE END
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